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IIRC Christians prohibited charging interest on loans (usury), not banking per se. I suppose a bank could be operated by Christians that simply accepted deposit
by jeff_petersen 10y ago
IIRC Christians prohibited charging interest on loans (usury), not banking per se. I suppose a bank could be operated by Christians that simply accepted deposits and charged a sum for safekeeping with no loans whatsoever. I don't know that anything like that ever happened in practice, however, since anybody with enough money to require safekeeping in a vault probably had their own vault.
Likewise an interest free loan would be permissible, though there wouldn't be great incentives to offer them except to family members, for example.
- lmm 10y agoWhat happened in the Islamic world was partnerships instead. If a merchant wanted to make a trade expedition funded by a banker, they'd set up the expedition as a partnership with the banker providing the funds and the merchant doing the work, splitting the profits, in a way that's economically equivalent to lending money at interest. Similarly, insurance syndicates tended to be organised as a bunch of merchants getting together and agreeing to pool a certain amount of funds that would be used to repay any of their losses. (It works up to a point, but it's hard to scale. You can emulate a loan contract between two parties, but you can't have a bond market because the "loans" aren't tradeable)